Tax Changes for UK resident, non-domiciled hedge fund managers
The Chancellor gave his Budget speech on Wednesday 19 March 2014, with a particular focus on tax avoidance. For many hedge funds and their managers, the impact of one particular change could be of particular concern.
If you are a UK tax resident, but non-domiciled, and receive income from more than one source, there are some significant changes to the way your tax will be calculated from April 2014.
The new rules for non-domiciles apply where:
- Individual has both UK and overseas employments with the same employer or where employers are associated;
- UK and overseas employments are related to each other;
- Foreign tax rate that applies is less than 65% of the UK additional rate – e.g 65% of 45% = 29.25%
The main initiative behind this move is to try and combat tax motivated arrangements – e.g. trading via from the Cayman Islands – with the implication being that much of the work, relating to the non-domicile engagements, will actually be done from within the UK (i.e. conference calls, Skype, emails, etc).
Here is a summary of where the new rules may apply:
- Income from overseas contracts taxed in UK on an arising basis
- Tax treaty may override the above
- Really looking at tax motivated arrangements
- Let out for ‘nominal directorships’ – own < 5% of OSC
- Detail revisions not published yet